Bipartisan Push Aims to Overhaul Pharmacy Benefit Manager (PBM) Incentives, Targeting Lower Drug Costs
A coalition of lawmakers from both sides of the political aisle is spearheading an effort to reform the financial incentives that govern Pharmacy Benefit Managers (PBMs), arguing that the current structure contributes to inflated drug prices and limits potential savings for patients.
The proposed legislation, known as the Delinking Revenue from Unfair Gouging (DRUG) Act, seeks to address concerns that PBMs are incentivized to favor higher-priced medications to maximize their profits, ultimately burdening consumers with increased healthcare expenses.
Spearheaded by physician and Republican Representative Mariannette Miller-Meeks of Iowa, the DRUG Act proposes a significant shift in how PBMs are compensated. Instead of charging a percentage of the drug price, PBMs in the commercial market would be required to charge a flat fee for their services related to a specific prescription drug. This change aims to remove the incentive for PBMs to inflate drug prices, as their compensation would no longer be directly tied to the cost of the medication.
PBMs act as intermediaries between insurance companies, drug manufacturers, and pharmacies. Their primary function is to manage drug prices and ensure patient access to medications. However, critics argue that the current incentive structure encourages PBMs to prioritize their own financial gains over the best interests of patients.
According to the sponsors of the DRUG Act, the current system inadvertently motivates PBMs to drive up the list price of drugs to increase their profits. By charging a percentage of the drug price, PBMs benefit directly from higher costs, creating a perverse incentive that undermines efforts to lower healthcare expenses.
Representative Miller-Meeks emphasized the detrimental impact of PBM practices on local pharmacies and patient access to medications. She stated that PBMs have excessive influence over the prices patients pay at the pharmacy counter, adding that the practices are resulting in the closure of local Iowa pharmacies, impacting proximity and access to medications for Iowans. She believes that the DRUG Act will put downward pressure on prescription drug prices and insurance premiums by removing the incentive for PBMs to drive up the list price of medications.
The Iowa Pharmacy Association has echoed these concerns, highlighting that PBMs employ opaque reimbursement models that often reimburse pharmacies less than the list cost of a drug and the services provided to dispense it. This practice has led to financial strain on pharmacies, forcing many to close their doors. The association reported that 29 Iowa pharmacies and 2,300 pharmacies nationwide closed in 2024.
While PBMs have played a role in expanding drug access, the industry has become increasingly concentrated over the years. A 2024 report from the Federal Trade Commission revealed that the three largest PBMs now manage nearly 80% of all prescriptions filled in the United States. This consolidation has raised concerns about anti-competitiveness and the potential for PBMs to exert undue influence over drug prices.
The DRUG Act’s reforms aim to address this anti-competitiveness and promote a more level playing field in the pharmaceutical market. Sponsors of the bill believe that by reducing the incentive for PBMs to favor higher-priced drugs, the legislation will help lower costs for consumers and ensure that patients have access to the medications they need at affordable prices.
Representative Nannette Barragán, a Democrat from California and co-sponsor of the DRUG Act, stated that PBMs contribute to high drug costs because they are incentivized to steer patients towards drugs that are more profitable for PBMs, but may be less clinically effective for consumers. Barragán emphasizes that this broken system disproportionately harms low-income individuals, seniors, and those with chronic illnesses who rely on life-saving prescriptions to manage their health.
Representative Donald Norcross, a Democrat from New Jersey and another co-sponsor of the DRUG Act, highlighted the urgent need for relief from high prescription drug prices. Norcross said that families in his district are crying out for relief from high prescription drug prices and that Americans deserve access to quality health care and affordable prescription drugs. He added that the DRUG Act reins in prescription drug prices by removing the incentive for pharmacy benefit managers to drive up costs, increasing transparency and prioritizing patients over profits.
The bipartisan support for the DRUG Act signals a growing recognition of the need to address the role of PBMs in driving up drug costs. By reforming the financial incentives that govern these intermediaries, lawmakers hope to create a more transparent and competitive pharmaceutical market that benefits patients and promotes affordable access to medications. The legislation represents a significant step towards reining in prescription drug prices and ensuring that patients have access to the medications they need without facing undue financial burdens.
